Supermarket chains selling on Amazon Prime Now see big drop in orders

For several stores of Big Bazaar, Star Bazaar, Modern Bazaar and Spar, daily orders through the Prime Now platform have more than halved over the past six months.Varsha Bansal&Supraja Srinivasan | ET Bureau | Updated: August 28, 2018, 11:25 IST

Several large supermarket chains selling on Amazon India’s hyper-local grocery delivery platform Prime Now are witnessing significant drop in orders, even as the e-commerce firm’s own store is registering a remarkable surge in shipments.

For several stores of Big Bazaar, Star Bazaar, Modern Bazaar and Spar, daily orders through the Prime Now platform have more than halved over the past six months, according to people aware of the matter. Prime Now’s overall daily shipments, though, have surged to 5,500 from 3,000 in December as Amazon India increased focus on its own grocery store, called Now, they said.

“Amazon is trying to push every order through its Now store. In the long-term, they are likely to cease their association with all these supermarkets and move exclusively to the Now Store,” one of them said, declining to be identified.

Big Bazaar, which listed on the platform in February 2016 with 40 stores, has delisted more than half of those because of low order volumes. Overall, though, Big Bazaar’s volume of orders through the remaining stores on the platform remains consistent at 800-820 a day, and the value of the orders has increased marginally to Rs 2.1-2.4 crore a month.

For Spar, which has partnered with Prime Now in two cities, daily orders on the platform have plunged to 50-60 from 500-600 some months ago. Star Bazaar’s daily orders on Prime Now have dropped to single digits, forcing the supermarket chain to phase out its stores from the platform, according to the people aware of the developments. “The main issue for these retailers has been Amazon’s multi-categorisation approach, which has resulted in a delivery nightmare for some of them,” said an executive at a logistics firm that handles deliveries for a supermarket chain in the western India region. “They have not been able to keep up with Amazon’s delivery timelines and have thus seen their volumes drop.”

A spokesperson for Amazon said Prime Now’s business has grown by over 250% since July 2017. “We continue to work with leading retail chains,” said the spokesperson. “We focus only on inputs and are constantly working towards enhancing a customer’s shopping experience on Prime Now.”

Big Bazaar, Star Bazaar, Modern Bazaar and Spar did not reply to emailed queries.

Amazon India is moving to a full-stack model for its grocery business from a hyper-local delivery model so it can have end-to-end ownership in the high-frequency category while keeping costs under control, said the people aware of the developments. The company launched 15 fulfillment or delivery centers for grocery in February in an indication of its intent to control inventory.

Amazon India’s strategy mirrors that of SoftBank-backed Grofers, which began as a hyperlocal grocery delivery platform but moved to an inventory-led model with a recent focus on inhouse labels to clock higher margins.

Amazon’s aggressive push in the category comes as Walmart-owned Flipkart plans to invest $264 million in its grocery business, Supermart, over the next three years, as ET reported this month.

Amazon also runs two other grocery services—Amazon Pantry, which is present in 38 cities, and Subscribe & Save, which has over 1 million subscribers. The latter, say industry experts, is an area of focus for the Seattle-based giant. Prime Now is currently present in four cities—Mumbai, Delhi, Hyderabad and Bengaluru.

“(Amazon’s) whole idea is to push Pantry through Amazon Prime customers because Pantry is available in several more cities,” said an expert tracking the space. “They want to make sure that Prime customers buy more categories and buy more frequently.”